Renewable Energy Policy and Wind Generation in Ontario Policy Brief
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Policy Brief January 2017 Renewable Energy Policy and Wind Generation in Ontario EXECUTIVE SUMMARY • Wind generation has grown rapidly to become a significant contributor to Ontario’s electricity generation over the past decade, accounting for 6% of total generation production and 10% of installed capacity in 2015. • Despite a stated goal of streamlining renewable energy development, the 2009 Green Energy and Green Economy Act has increased the time required for projects to achieve commercial operation by some measures. The average development time for an operating wind project in Ontario after receiving a contract to sell electricity from the Ontario Power Authority before the 2009 Act was 29.1 months, in comparison to 41.1 months for those contracted after the Green Energy and Green Economy Act. As energy policies in many jurisdictions have shifted towards finding environmentally sustainable ways to produce energy, there has been a rise in the focus on renewable power generation technologies. In Ontario, the government first publically announced renewable power targets in 2003 and began its first renewable energy supply program in 2004. The government subsequently enacted the Green Energy and Green Economy Act (GEA) in 2009 to promote more and faster development of renewable energy projects. This included streamlining project construction and application processes, establishing a feed-in-tariff (FIT) program with guaranteed prices under long-term contracts, and creating a Renewable Energy Approval (REA) process that exempted some projects from requirements for approval under existing legislation.1 Together, these measures were intended to incentivize the development of renewable energy technologies, create new jobs, and attract private investment. In the following years, interest in renewable electricity generation capacity and the importance of wind power both for electricity generation and in public debate has grown dramatically in Ontario. The purpose of this Policy Brief is to assess whether the GEA had a measurable impact on the duration of regulatory approval processes by centralizing them in the provincial government and limiting the power of municipalities. In an effort to quantify the impact of renewable energy policies on the growth of the wind power sector in Ontario, the Ivey Energy Policy and Management Centre has undertaken a data collection project with the goal of capturing project development information for every proposed, operating, withdrawn, or cancelled 1 See Green Energy and Green Economy Act, 2009, S.O. 2009, c. 12 - Bill 150, May 14, 2009, http://www.ontario.ca/laws/statute/s09012 and Mulvihill, et al., 2013. Policy Brief Renewable Energy Policy and Wind Generation in Ontario onshore, commercial wind power project in Ontario.2 This report summarizes the main insights that emerge from the construction of a database following all such identifiable projects through the regulatory process, construction, and operation stages. The resulting database is unique and can be used for a variety of policy, project financing, and project feasibility studies.3 ONTARIO RENEWABLE ENERGY POLICY The Government of Ontario first announced renewable power targets in 2003 of 5% of the province’s electricity generation capacity, approximately 1350 MW, to be achieved by 2007. In 2004, the Ontario Power Authority announced the first round of Request for Proposals (RFPs) for renewable energy capacity under the Renewable Energy Supply (RES) program. Additional rounds occurred in 2005 (RES II) and 2007 (RES III). The resulting wind power generation contracts yielded average rates of $0.08-0.09/kWh for RES contracted suppliers.4 An additional program, the Renewable Energy Standard Offer Program (RESOP) was launched in November of 2006 to encourage the development of smaller projects with a size limit of 10 MW per project. The RESOP paid $0.11/kWh under a 20-year contract and limited the time to bring a contracted project into operation to 3 years. However, RESOP was suspended in 2008 when it fell short of meeting the 2007 generation target, with only about 60% of the 1350 MW initial target for renewable power generation capacity achieved by the end of 2008. While the RESOP program had attracted a significant number of applications from renewable energy developers, local communities and municipal councils in some areas had vigorously resisted local zoning approvals. In addition, instead of attracting the intended target of small developers, contracts granted under the RESOP program were often awarded to commercial developers dividing projects into smaller parcels in order to meet eligibility requirements.5 Subsequently, the Green Energy and Green Economy Act was enacted in 2009 to address many of the perceived problems under the RES programs and RESOP. The Feed-inTariff (FIT) program replaced RESOP, offering qualifying projects stable energy purchase prices under 20-year contracts for energy generated from renewable sources, including wind power projects. The program was heralded as “North America’s first comprehensive feed-in tariff program for renewable energy” and began accepting applications in October 2009.6 In Ontario the FIT program was initially open to projects with a generating capacity of at least 10 kW (projects of less than 10 kW were eligible for the microFIT) program, and included domestic content requirements that were intended to foster a ‘green’ supply chain in the province. The FIT price schedule for wind projects changed five times between 2009 and 2015 with base prices ranging from 11.5-13.5 cents per kilowatt-hour and additional “price adders” for projects with community, Aboriginal, and public sector equity participation. (See Table 1.) 2 There is no single comprehensive database that tracks the development of Ontario wind turbine projects, and existing sources often have conflicting data. For example, according to the Canadian Wind Energy Association, in 2015 Ontario wind generation comprised 79 installed projects. However, 2015 data from the IESO identifies 93 commercially operating, contracted wind generation projects. Other measures of wind development include 84 projects with Feed- in-Tariff (FIT) contract offers, 69 projects that have submitted Renewable Energy Approval (REA) applications, 164 projects in various stages of development identified in a 2009 Ontario Power Authority survey, or over 300 proposed projects according to some Ontario wind resistance groups. 3 Christidis and Law (2013) describe an effort to compile similar data for preexisting wind farms and create a map for use in environmental health research. The paper includes discussion of inconsistencies across publically available Ontario wind farm data and maps available in other jurisdictions. 4 See Holburn, Lui, and Morand, 2010. 5 See Holburn, Lui, and Morand, 2010. 6 Projects under 500kW and in-service on October 1, 2009 were eligible to transition to FIT contracts as well. 2 January 2017 Table 1: Feed-In Tariff Prices for On-shore Wind Projects Aboriginal Community Municipal/Public Escalation Effective Date Project Size Contract Price Price Adder Price Adder Sector Adder Percentage 9/2009 – 4/2012 Any 13.5 1.5 1.0 20% 4/2012 – 8/2013 Any 11.5 1.5 1.0 20% 8/2013 – 12/2013 Any 11.5 1.5 1.0 1.0 20% 1/2014 – 9/2014 <= 500 kW 11.5 1.5 1.0 1.0 20% 9/2014 – 12/2015 <= 500 kW 12.8 1.5 1.0 1.0 20% Notes: Prices are in cents per kilowatt-hour. Price adders are maximum allowable amounts and determined on equity participation. Escalation percentage is based on the Consumer Price Index. Source: IESO, FIT Price Schedule. Three rounds of FIT contract offers were made between 2009 and 2015, designated as FIT 1, FIT 2, and FIT 3, respectively.7 Applicants who were not awarded contracts due to limited transmission capacity were ranked and continued to be eligible in the future. The timing of FIT contract offers has been idiosyncratic with new contracts offered as new transmission capacity became available or in accordance with ministerial directives or other events. For example, in July 2011 new contracts were offered to some previous applicants based on their priority ranking due to the new Bruce-to-Milton transmission line coming into service. While little data is available on the development of projects prior to receiving generation contract offers, capacity allocation is clearly a significant hurdle in the development process. In the Bruce transmission area, 30-50 projects appear on the priority ranking lists from 2010-2011 awaiting capacity allocation. Across all transmission areas during this period, approximately 115 different on-shore wind applications for FIT contracts appear on the priority rankings that are not subsequently offered FIT contracts. The GEA also gave Ontario’s Minister of Energy substantial latitude to determine policies to expand renewable energy development in the province, including determining the type of procurement process and pricing, among other factors. Each round of contract offers introduced new “versions” of FIT. Together with smaller changes in rules, contracts, and definitions there were approximately 16 changes to the FIT program that led to the issuance of new written FIT rules, contracts, and/or definitions between September 2009 and December 2015. However, in October 2011 a major review of the FIT program was announced that halted consideration of new contracts. While previously awarded contracts would continue under the existing FIT rules, all other applicants would be subject to new FIT program rules